Tag Archives: Ethics in Government Spending

Senate Report Details FEMA Disaster Response Contracting Failures



“The report details many shortcomings of the state of FEMA contracts for disaster response supplies. Before awarding a contract, federal agencies must assess contractor capabilities to deliver the required goods and services. For the most part, FEMA failed to do this. 

A $156 million FEMA contract with the Georgia-based consulting firm Tribute Contracting LLC was terminated “for cause,” having only delivered 50 thousand of the required 30 million meals.  Oddly, the firm, which had little experience in this level of disaster work, consisted of just one person, calling into question why it was tapped for such an important and massive contract. “


“The 2018 hurricane season starts in just over a month. Considering the severity and impact of last year’s storms, the nation should ask if we are adequately prepared for the next major disaster. Unfortunately, the findings of a recent Congressional investigation raise serious concerns.

recent report from the staff of Senator Claire McCaskill (D-MO), Ranking Member of the Committee on Homeland Security and Governmental Affairs, calls into question an important aspect of disaster preparations by the Federal Emergency Management Agency (FEMA). The report details many shortcomings of the state of FEMA contracts for disaster response supplies.

During the first few days after a major disaster, FEMA is called upon to provide vital supplies to the affected communities. FEMA relies on a network of large supply centersthat can quickly respond, delivering thousands of pallets of basic commodities such as water, food, blankets, plastic tarps for emergency shelter and repairs, electrical generators, and other supplies and equipment. For disasters the size of the 2017 hurricanes that struck the southeastern states and Caribbean, FEMA also has to quickly engage with the private sector to procure and deliver large additional amounts of these same basic commodities.

FEMA is supposed to have “prepositioned” contracts in place before a major disaster. While no one can predict all the needs for a specific disaster, the basic commodities that are needed in very large, easily deliverable quantities don’t change. To ensure that continued delivery is uninterrupted, FEMA should have contracts for these supplies already vetted and ready to act on. This strategy follows current law, which correctly requires that FEMA follow a “contracting strategy that maximizes the use of advance contracts to the extent practical and cost-effective.”

The McCaskill report details how FEMA did not adequately prepare for last year’s hurricane season with prepositioned contracts for at least some disaster commodities. For example, of the $206.9 million in plastic sheeting and tarps contracts for the 2017 hurricanes, only 3.5 percent was through prepositioned contracts. In fact, FEMA had only three prepositioned contracts for tarps and none for plastic sheeting before the start of the 2017 hurricane season. After the hurricane disasters struck the United States, FEMA needed to award eleven additional contracts for those basic commodities.

And the new contracts weren’t vetted through the appropriate process. Media outlets had previously reported on contracting failures for plastic sheeting and tarps. However, the McCaskill report described a broader context of contract failure by FEMA. While contracts can fail at times due to reasons beyond the control of an agency, the report gave examples of glaring problems in FEMA’s review process. For example, FEMA awarded $73 million in new contracts for plastic sheeting and tarps to companies that had formed just months earlier and had little or no experience with the product.

It is worth noting that there were other reported FEMA contracting failures beyond what was examined in the McCaskill report. Worse, in 2016, the Government Publishing Office (GPO) terminated “for default” an unrelated Tribute contract to make 3,000 tote bags, and excluded the company from receiving further contracts above $35,000 until January 7, 2019, unless “there is a compelling reason.” The GPO’s contract exclusion should have raised red flags for FEMA because the federal government’s own database clearly lists the Tribute contract prohibition.

Most importantly, the McCaskill report revealed that many of the problematic contracts resulted in delayed delivery of the commodities to those in need within affected communities.

During a hearing of the Senate Homeland Security and Governmental Affairs Committee on April 11, FEMA Administrator William “Brock” Long discussed the report, admitting that “I realize we got work.” He assured the panel that FEMA will address the contracting problems.

POGO will continue to press federal agencies to adequately prepare for the next major disaster. A good place to start would be to improve contracting procedures at FEMA in order to ensure that vital supplies and services reach those suffering in the aftermath of a disaster.”




Defense Logistics Agency (DLA) Lost Track of Hundreds of Millions of Dollars




| Daniel Slim/AFP/Getty Images  DLA serves as the Walmart of the military, with 25,000 employees who process roughly 100,000 orders a day on behalf of the Army, Navy, Air Force, Marine Corps and a host of other federal agencies — for everything from poultry to pharmaceuticals, precious metals and aircraft parts.


“Ernst & Young found that the Defense Logistics Agency failed to properly document more than $800 million in construction projects.

Across the board, its financial management is so weak that its leaders and oversight bodies have no reliable way to track the huge sums it’s responsible for, the firm warned in its initial audit of the massive Pentagon purchasing agent.

The audit raises new questions about whether the Defense Department can responsibly manage its $700 billion annual budget — let alone the additional billions proposes. 

The department has never undergone a full audit despite a congressional mandate — and to some lawmakers, the messy state of the Defense Logistics Agency’s books indicates one may never even be possible.”

“If you can’t follow the money, you aren’t going to be able to do an audit,” said Sen. Chuck Grassley, an Iowa Republican and senior member of the Budget and Finance committees, who has pushed successive administrations to clean up the Pentagon’s notoriously wasteful and disorganized accounting system.

The $40 billion-a-year logistics agency is a test case in how unachievable that task may be. The DLA serves as the Walmart of the military, with 25,000 employees who process roughly 100,000 orders a day on behalf of the Army, Navy, Air Force, Marine Corps and a host of other federal agencies — for everything from poultry to pharmaceuticals, precious metals and aircraft parts.

But as the auditors found, the agency often has little solid evidence for where much of that money is going. That bodes ill for ever getting a handle on spending at the Defense Department as a whole, which has a combined $2.2 trillion in assets.

In one part of the audit, completed in mid-December, Ernst & Young found that misstatements in the agency’s books totaled at least $465 million for construction projects it financed for the Army Corps of Engineers and other agencies. For construction projects designated as still “in progress,” meanwhile, it didn’t have sufficient documentation — or any documentation at all — for another $384 million worth of spending.

The agency also couldn’t produce supporting evidence for many items that are documented in some form — including records for $100 million worth of assets in the computer systems that conduct the agency’s day-to-day business.

“The documentation, such as the evidence demonstrating that the asset was tested and accepted, is not retained or available,” it said.

The report, which covers the fiscal year that ended Sept. 30, 2016, also found that $46 million in computer assets were “inappropriately recorded” as belonging to the Defense Logistics Agency. It also warned that the agency cannot reconcile balances from its general ledger with the Treasury Department.

The agency maintains it will overcome its many hurdles to ultimately get a clean audit.

“The initial audit has provided us with a valuable independent view of our current financial operations,” Army Lt. Gen. Darrell Williams, the agency’s director, wrote in response to Ernst & Young’s findings. “We are committed to resolving the material weaknesses and strengthening internal controls around DLA’s operations.”

In a statement to POLITICO, the agency also maintained it was not surprised by the conclusions.

“DLA is the first of its size and complexity in the Department of Defense to undergo an audit so we did not anticipate achieving a ‘clean’ audit opinion in the initial cycles,” it explained. “The key is to use auditor feedback to focus our remediation efforts and corrective action plans, and maximize the value from the audits. That’s what we’re doing now.”

Indeed, the Trump administration insists it can accomplish what previous ones could not.

“Beginning in 2018, our audits will occur annually, with reports issued Nov. 15,” the Pentagon’s top budget official, David Norquist, told Congress last month.

That Pentagon-wide effort, which will require an army of about 1,200 auditors across the department, will also be expensive — to the tune of nearly $1 billion.

Norquist said it will cost an estimated $367 million to carry out the audits — including the cost of hiring independent accounting firms like Ernst & Young — and an additional $551 million to go back and fix broken accounting systems that are crucial to better financial management.

“It is important that the Congress and the American people have confidence in DoD’s management of every taxpayer dollar,” Norquist said.

But there is little evidence the logistics arm of the military will be able to account for what it has spent anytime soon.

“Ernst & Young could not obtain sufficient, competent evidential matter to support the reported amounts within the DLA financial statements,” the Pentagon’s inspector general, the internal watchdog that ordered the outside review, concluded in issuing the report to DLA.

The accounting firm itself went further, asserting that the gaping holes uncovered in bookkeeping procedures and oversight strongly suggest there are more.

“We cannot determine the effect of the lack of sufficient appropriate audit evidence on DLA’s financial statements as a whole,” its report concludes.

A spokeswoman for Ernst & Young declined to respond to questions, referring POLITICO to the Pentagon.

Grassley — who was fiercely critical when a clean audit opinion of the Marine Corps had to be pulled in 2015 for “bogus conclusions” — has repeatedly chargedthat “keeping track of the people’s money may not be in the Pentagon’s DNA.”

He remains deeply doubtful about the prospects going forward given what is being uncovered.

“I think the odds of a successful DoD audit down the road are zero,” Grassley said in an interview. “The feeder systems can’t provide data. They are doomed to failure before they ever get started.”

But he said he supports the continuing effort even if a full, clean audit of the Pentagon can never be done. It is widely viewed as only way to improve the management of such huge sums of taxpayer dollars.

“Each audit report will help DLA build a better financial reporting foundation and provide a stepping stone towards a clean audit opinion of our financial statements,” the agency maintains. “The findings also improve our internal controls, which helps to improve the quality of cost and logistics data used for decision-making.”



U.S. Government Writing Over $33 Billion in Blank Checks to Pentagon and Lockheed


Blank Checks


“In a sign of how strange the budget process has become, the House Appropriations Committee has approved a defense spending bill that basically gives Secretary Jim Mattis a $28.6 billion blank check.

Scattered across seven different accounts in the base and Overseas Contingency Operationsbudgets, it’s called the National Defense Restoration Fund, and it makes up 4.3 percent of the bill’s $658.1 billion Pentagon budget.

That percentage may seem small, but it’s more than any previous SecDef has had at his discretion. The only requirement? To “notify” Congress 15 days before dedicating the funds to a specific purpose. In theory, that gives legislators time to stop a transfer they dislike, but it would require new legislation, and the Hill just isn’t set up to pass bills on a two-week turnaround. That is, of course, why, historically, almost everything has to go through the annual budget process.”



“The Defense Department has awarded Lockheed Martin Corp. a $4.49 billion undefinitized contract action to continue production on the latest batch of F-35 Joint Strike Fighters even as it continues to negotiate a firm price for the fifth-generation jets.

The UCA — a type of contract in which bottom-line terms or prices have not been agreed upon before performance is begun — stipulates a max price of $5.6 billion for Lockheed to continue working on the Low Rate Initial Production, or LRIP, lot 11 jets, according to the F-35 Joint Program Office.”






Hey Big Spender: Spend Our Money More Ethically



Image: politichicks.tv


“The federal government is the largest single buyer on the global market, spending upwards of half a trillion dollars annually on goods and services. A new report by a coalition of human rights, environmental, labor, and development organizations explains how Uncle Sam can wield its immense purchasing power to curb dangerous and exploitative labor practices around the world.

This week, the International Corporate Accountability Roundtable (ICAR) issued the report Turning a Blind Eye? Respecting Human Rights in Government Purchasing. The report explores ways federal contract spending can be leveraged to improve the treatment of workers in the apparel, agriculture, electronics, mineral extraction, and logistical and security service sectors. (Full disclosure: the Project On Government Oversight provided comments to ICAR during the drafting of the report.)

According to the report, the government has long been accused of “turning a blind eye” to the harms that directly or indirectly result from its contracting practices, such as child labor, human trafficking, and unsafe workplaces. The government’s overriding concern for low prices and quick turnaround, combined with weak supply chain oversight and transparency, has caused a race to the bottom among global suppliers. Among the examples cited in the report:

  • Serious health and safety hazards in electronics manufacturing
  • Child and forced labor in agricultural, seafood, and mining industries
  • Human trafficking and torture of workers employed by private security contractors
  • Low wages, excessive working hours, and crackdowns on labor organizing in apparel factories

ICAR proposes ways the government can ensure that human rights are protected at all stages of the contracting process. For example, the government should consider prospective contractors’ capacity to manage their global supply chains as part of the responsibility determination and require them to disclose their suppliers, subcontractors, and factory locations. ICAR also recommends expanding the Federal Acquisition Regulation’s human rights protections and including more information about contractors’ human rights records in the Federal Awardee Performance and Integrity Information System (FAPIIS) database.

The Obama Administration has made significant efforts in recent years to improve working conditions for its worldwide contractor workforce. A series of executive orders covering contractors have cracked down on human trafficking, established a $10.10 minimum wage, banned discrimination based on sexual orientation and gender identity, and most recently, required contractors to disclose their labor violations. These are steps in the right direction. However, as organizations such as ICAR make clear, much more can be done to ensure that billions of U.S. taxpayer dollars do not end up perpetuating many of the abuses in the global economy.”